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Senator Increases Pressure On Oil-Market Regulator

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Senator Increases Pressure On Oil-Market Regulator

June 4, 2008; Page C6

WASHINGTON — Washington’s push for tougher measures to rein in energy and agricultural commodities markets gained steam Tuesday.

Sen. Maria Cantwell (D., Wash.) said she is prepared to hold up appointments to the agency that regulates energy and commodities futures trading if it doesn’t strengthen crude-oil market oversight.

[George Soros]

Sen. Cantwell said she would prevent the appointment of the chairman of the Commodity Futures Trading Commission unless the agency acted to regulate U.S. crude-oil contracts traded on foreign boards of trade.

The senator said she will also push for the Federal Trade Commission to issue a temporary rule that would allow the agency to start an investigation into possible wholesale-petroleum-market manipulation, combining its oversight powers with the CFTC, which last week announced a broad-based probe into oil markets.

Sen. Cantwell led a Senate Commerce Committee hearing on speculation in the energy market where experts, including billionaire investor George Soros and a former senior CFTC official, said the lack of oversight in the markets has contributed to an oil-market bubble that threatens to pull the U.S. economy into a recession.

In interviews before and after the hearing, Sen. Cantwell said she is prepared to delay the Commission appointments — including the appointment of acting chairman Walter Lukken to full chairman — until the CFTC acts.

“If that’s what it takes to get the CFTC to do their job, we’ll use every tool we have,” Sen. Cantwell said.

As oil and food prices have risen to record levels, members of Congress have called for tougher measures to curb financial speculation in key commodity markets. Many economists and industry players say the impact of speculative investing on commodity prices is small compared with the pulls of supply and demand.

But the view that speculation is fueling high commodity prices has gained political traction, and got another boost from Mr. Soros.

Mr. Soros told a Senate subcommittee that commodity index funds are helping to create a bubble in the crude-oil market and should be “discouraged” from being able to participate in the market.

Congress and regulators should be careful, Mr. Soros warned, when considering how to discourage commodity index-fund trading. Forcing participants, such as pension funds, to halt speculation in commodities could divert them into unregulated markets that are less transparent, Mr. Soros said.

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